Monday, September 26, 2011

Potential Recession Minimum @1086 pts

Potential Recession Minimum at 1086 pts. To gauge how much more the KLCI has to fall, we look at the historical trading range of the KLCI PER in Figure 2. With the KLCI traditionally trading between 13 to 19x PER, we can see that only in severe situations will the PER drop lower such as in the period between Sep 2008 to Dec 2008 when global credit markets froze after the Lehman crisis. At that point of time, the KLCI traded slightly below 10x PER. Extrapolating a 10x PER against our 2012 KLCI forecasts, we derive a 1086 pts potential recession minimum for the KLCI.